Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations for the year ended December 31, 2024, compared to 2023, should be read in conjunction with the accompanying consolidated financial statements in Part II, Item 8. For discussion of the year ended December 31, 2023, compared to 2022, please refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024.
Executive Overview
Our mission is to make real estate investments, primarily focused on the multifamily sector within targeted U.S. markets, where outcomes are enhanced through our human capital and substantial value is created for investors, teammates, and the communities in which we operate.
Please refer to “Item 1. Business” for additional discussion of our business organization and strategy and “Item 2. Properties” and “Schedule III – Real Estate and Accumulated Depreciation” for details regarding the size, location, and key characteristics of our various properties.
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Results for the Twelve Months Ended December 31, 2024
The results from the execution of our business plan during the twelve months ended December 31, 2024, are described below.
Financial Results and 2024 Highlights
• For the year ended December 31, 2024, net loss attributable to common stockholders per share, on a fully dilutive basis, was a net loss per share of $0.75.
• For the year ended December 31, 2024, NOI from our Operating segment was $99.0 million, up 4.5% year-over-year, with average monthly revenue per apartment home increase by 3.8% to $2,290.
• For the year ended December 31, 2024, we substantially completed construction at Upton Place in Washington, D.C., Strathmore Square in Bethesda, Maryland, and Oak Shore in Corte Madera, California and advanced the lease-up of our recently completed developments.
• During the fourth quarter, we increased our ownership in Upton Place as our development partner exercised the option to sell their 10% interest in the asset. Also, Aimco secured a bridge loan to replace the higher cost construction loan, and partially paydown a project-level preferred equity investor.
• During the third quarter, we began construction on an ultra-luxury residential tower located at 640 NE 34th Street ("34th Street") in the Edgewater neighborhood of Miami, Florida. Total direct project costs for the 34th Street development are expected to be $240.0 million with initial occupancy scheduled in mid-2027.
• During the fourth quarter, we sold, for a total price at Aimco's share of $203.8 million, our interests in two investments in Miami, Florida: The Hamilton, a recently completed redevelopment of a 276-unit apartment building, and a 2.8-acre development site at 3333 Biscayne Boulevard. On December 19, 2024, Aimco's Board of Directors declared a $0.60 per share special cash dividend to distribute the net proceeds from these transactions to stockholders of record on January 14, 2025.
• During the fourth quarter, we reached an agreement to sell, in 2025, the Brickell Assemblage for $520.0 million, and the buyer's deposit of $38.0 million is non-refundable.
Operating Property Results
We own a diversified portfolio of stabilized apartment communities located in eight major U.S. markets with average rents in line with local market averages (generally defined as B class).
Highlights for the year ended December 31, 2024 include:
• Revenue for our Operating segment was $140.1 million, up 4.5% year over year, resulting from an $85 increase in average monthly revenue per apartment home to $2,290 and an increase in Average Daily Occupancy of 60-basis points to 97.2%.
• Expenses for our Operating segment were $41.1 million, up 4.4% year over year, due primarily to higher real estate taxes and insurance costs.
• Net operating income for our Operating segment was $99.0 million, up 4.5% year over year.
Value Add and Opportunistic Investments
Development and Redevelopment
We generally seek development and redevelopment opportunities where barriers to entry are high, target customers can be clearly defined, and where we have a comparative advantage over others in the market. Our Value Add and Opportunistic investments may also target portfolio acquisitions, operational turnarounds, and re-entitlements.
As of December 31, 2024, we had one multifamily development project under construction and three multifamily communities that have been substantially completed and are now in lease-up. In addition to Aimco's core multifamily developments, The Benson Hotel was completed in 2023 and remains in the stabilization process.
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We have a pipeline of future value-add opportunities totaling approximately 7.7 million gross square feet of development in our target markets of Southeast Florida, the Washington, D.C. Metro Area, and Colorado's Front Range. During the year ended December 31, 2024, we invested $126.1 million in development and redevelopment activities compared to $274.9 million in the year ended December 31, 2023.
Highlights for the year ended December 31, 2024, include:
• In Upper Northwest Washington, D.C., construction at Upton Place is substantially complete with all 689 apartment homes delivered. As of December 31, 2024, 314 homes were leased or pre-leased at rental rates greater than underwriting and 90% of the project's 105,000 square feet of retail space has been leased.
• In Bethesda, Maryland, all 220 of the highly tailored apartment homes at the first phase of Strathmore Square have been delivered. As of December 31, 2024, 84 homes were leased or preleased with rents in line with our initial projections, and 75 homes were occupied.
• In Corte Madera, CA, construction at Oak Shore is substantially complete with all 16 ultra-luxury single family rental homes and eight accessory dwelling units delivered. As of December 31, 2024, 16 homes were leased or pre-leased at rental rates greater than underwriting.
• During the third quarter, construction began in Miami's Edgewater neighborhood on 34th Street, an ultra-luxury waterfront residential tower that will include 7,000 square feet of retail and rental homes averaging more than 2,500 square feet, with oversized private terraces, top-of-the-line finishes, and unobstructed views of Biscayne Bay. We expect to welcome the first residents at this $240.0 million project in 3Q 2027 and stabilize occupancy in 4Q 2028 .
• We invested $3.9 million into programming, design, documentation, and entitlement efforts primarily at our 901 North project in Fort Lauderdale, Florida. Consistent with our capital allocation strategy, we may choose to monetize certain pipeline assets prior to vertical construction in an effort to maximize value add and risk-adjusted returns.
Investment and Disposition Activity
We are focused on prudently allocating capital and delivering strong investment returns. Consistent with our capital allocation philosophy, we monetize the value within our assets when accretive uses of the proceeds are identified and invest when the risk-adjusted returns are superior to other uses of capital.
Highlights for the year ended December 31, 2024 include:
• In the fourth quarter, Aimco increased its ownership interest in its Upton Place property by $19.1 million, as its development partner exercised the option to sell the entirety of their 10% interest in the asset.
• In the fourth quarter, we sold, for $203.8 million, our interests in two real estate investments in the Edgewater neighborhood of Miami, Florida, retired $110.1 million of associated liabilities, and, in December, declared a divided to return approximately $90.0 million of capital to stockholders in January 2025.
o The Hamilton, our recently completed major redevelopment was sold for $190.0 million.
o Our interest in 3333 Biscayne Boulevard, a 2.8-acre development site, was purchased by our joint venture partner at a gross valuation of $66.5 million or $13.8 million at our share of the venture.
• In the fourth quarter, we entered into an agreement to sell the Brickell Assemblage for a gross price of $520.0 million.
o The buyer’s initial deposit of $38.0 million is now non-refundable, and due diligence has been completed.
o The buyer can exercise an option to finance up to $115.0 million of the purchase price with a transferable seller financing note from Aimco for a period of 18 months at a rate of 12%. If exercised, the purchase price increases by $20.0 million, to $540.0 million.
o The sale, which is subject to certain closing conditions and extension options, is scheduled to occur as early as March 2025 but may be extended at the buyer’s option to the fourth quarter of 2025, with such extensions requiring the buyer to increase its non-refundable deposit.
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o Net proceeds from the transaction, accounting for the associated property-level debt and deferred tax liability, are estimated to range from $300.0 to $320.0 million depending on the buyer’s election regarding seller financing. We intend to return the majority of the net proceeds from the transaction upon receipt to stockholders.
Balance Sheet and Financing Activities
We are highly focused on maintaining a strong balance sheet, including ample liquidity. As of December 31, 2024, we had access to $321.0 million in liquidity, including $141.1 million of cash on hand, $31.4 million of restricted cash, and the capacity to borrow up to $148.5 million on our revolving credit facility.
In the fourth quarter, we refinanced our Upton Place asset with a $215.0 million bridge loan. The three year loan, which has a fixed interest rate of 6.39% and is prepayable at par after 18 months, replaced the construction loan and funded the partial paydown of a project-level preferred equity investor, which together had a weighted average interest rate of 9.22% at the time of payoff.
Refer to the Liquidity and Capital Resources section for additional information regarding our leverage.
Financial Results of Operations
We have three segments: (i) Development and Redevelopment; (ii) Operating; and (iii) Other.
Our Development and Redevelopment segment includes properties that are under construction or have not achieved and maintained stabilization throughout the current year and comparable period, as well as land assemblages that are being held for future development. Our Operating segment includes 20 residential apartment communities that have achieved stabilized levels of operations as of January 1, 2023, and maintained it throughout the current year and comparable period. Our Other segment consists of properties that are not included in our Development and Redevelopment or Operating segments.
The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying consolidated financial statements in Item 8.
Results of Operations for the Year Ended December 31, 2024, Compared to the same period in 2023
Net income attributable to Aimco common stockholders increased by $63.7 million for the year ended December 31, 2024 compared to the same period in 2023, as described more fully below.
Property Results
As of December 31, 2024, our Development and Redevelopment segment included 9 rental communities, including one under construction and three substantially completed and in lease-up. Our Operating segment included 20 communities with 5,243 apartment homes, and our Other segment includes The Benson Hotel, our only hotel.
During the first quarter of 2024, we revised the information regularly reviewed by our President and Chief Executive Officer, the chief operating decision maker ("CODM"), to assess our operating performance. As a result, we reclassified The Benson Hotel from the Development and Redevelopment segment to the Other segment. In addition, during the year ended December 31, 2024, we disposed of a majority of our partnership interest in St. George Villas, which was previously reported within the Other segment, and The Hamilton, which was previously reported within the Development and Redevelopment segment. We also reclassified as held for sale 1001 Brickell Bay Drive, which was previously reported within the Other segment, and Yacht Club Apartments, which was previously reported in our Operating segment. Prior period segment information has been recast based upon our current segment population, and is consistent with how our CODM evaluates the business.
We use property net operating income ("PNOI") to assess the operating performance of our segments. PNOI is defined as rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, including utility reimbursements, for the consolidated communities; but excluding
• the results of four apartment communities with an aggregate 142 apartment homes that we neither manage nor consolidate, our investment in IQHQ, the Mezzanine Investment, and investments in real estate technology funds; and
• property management costs and casualty gains or losses, reported in consolidated amounts, in our assessment of segment performance.
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Please refer to Note 14 to the consolidated financial statements in Item 8 for further discussion regarding our segments, including a reconciliation of these amounts to consolidated rental and other property revenues and property operating expenses.
Property Net Operating Income
The results of our segments for the years ended December 31, 2024 and 2023, as presented below, are based on segment classifications as of December 31, 2024.
Year Ended December 31,
(in thousands)
2024
2023
$ Change
% Change
Rental and other property revenues, before utility reimbursements:
Development and Redevelopment
$
9,852
$
109
$
9,743
nm
Operating
140,099
134,078
6,021
4.5
%
Other
6,690
2,691
3,999
100.0
%
Total
156,641
136,878
19,763
14.4
%
Property operating expenses, net of utility reimbursements:
Development and Redevelopment
9,468
927
8,541
nm
Operating
41,089
39,356
1,733
4.4
%
Other
7,712
4,710
3,002
63.7
%
Total
58,269
44,993
13,276
29.5
%
Property net operating income:
Development and Redevelopment
384
(818
)
1,202
nm
Operating
99,010
94,722
4,288
4.5
%
Other
(1,022
)
(2,019
)
997
49.4
%
Total
$
98,372
$
91,885
$
6,487
7.1
%
For the year ended December 31, 2024, compared to the same period in 2023:
• Development and Redevelopment property net operating income increased by $1.2 million primarily due to the lease up of apartment homes at Upton Place and Strathmore Square.
• Operating property net operating income increased by $4.3 million, or 4.5%. The increase was attributable primarily to a $6.0 million, or 4.5% increase in rental and other property revenues due to higher average revenues of $85 per apartment home and 60-basis points increase in occupancy.
• Other property net operating income increased by $1.0 million, or 49.4%, primarily due to a full year of The Benson Hotel operations in 2024 whereas operations commenced in the second quarter of 2023.
The results of our segments for the years ended December 31, 2023 and 2022, as presented below, are based on segment classifications as of December 31, 2024.
Year Ended December 31,
(in thousands)
2023
2022
$ Change
% Change
Rental and other property revenues, before utility reimbursements:
Development and Redevelopment
$
109
$
24
$
85
nm
Operating
134,078
124,443
9,635
7.7
%
Other
2,691
—
2,691
nm
Total
136,878
124,467
12,411
10.0
%
Property operating expenses, net of utility reimbursements:
Development and Redevelopment
927
191
736
nm
Operating
39,356
37,803
1,553
4.1
%
Other
4,710
457
4,253
nm
Total
44,993
38,451
6,542
17
%
Property net operating income:
Development and Redevelopment
(818
)
(167
)
(651
)
nm
Operating
94,722
86,640
8,082
9.3
%
Other
(2,019
)
(457
)
(1,562
)
nm
Total
$
91,885
$
86,016
$
5,869
6.8
%
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For the year ended December 31, 2023, compared to the same period in 2022:
• Development and redevelopment property net operating income decreased by $0.7 million due to increases in property operating expenses due to the completion of Upton Place in the fourth quarter of 2023.
• Operating property net operating income increased by $8.1 million, or 9.3% for the year ended December 31, 2023, compared to 2022. The increase was attributable to a $9.6 million, or 7.7% increase in rental and other property revenues, offset partially by a $1.6 million, or 4.1% increase in property operating expenses due primarily to higher real estate taxes and insurance.
• Other property net operating income decreased by $1.6 million for the year ended December 31, 2023, compared to 2022, due primarily to the commencement of The Benson Hotel operations in the second quarter of 2023.
Non-Segment Real Estate Operations
Operating income amounts not attributed to our segments include property management costs, casualty losses, and, if applicable, the results of apartment communities sold or held for sale, reported in consolidated amounts, which we do not allocate to our segments for purposes of evaluating segment performance.
Depreciation and Amortization
For the year ended December 31, 2024, compared to the same period in 2023, Depreciation and amortization expense increased by $17.5 million, or 25.5%, due primarily to the substantial completion of Upton Place, Strathmore Square, and Oak Shore in 2024.
General and Administrative Expenses
For the year ended December 31, 2024, compared to the same period in 2023, General and administrative expenses were relatively flat.
Interest Income
For the year ended December 31, 2024, compared to the same period in 2023, Interest income decreased by $0.1 million, or 1%. The decrease is due primarily to higher rates of interest earned on excess cash invested in treasury bill investments and money market funds in 2023, partially offset by interest earned on seller financing provided in connection with the sale of a land parcel in December 2023.
Interest Expense
For the year ended December 31, 2024, compared to the same period in 2023, Interest expense increased by $32.3 million, or 85.7% due primarily to increased non-recourse construction loan draws and reduced capitalization as development projects are advanced and completed, partially offset by the repayment of certain nonrecourse property debt in 2023.
Mezzanine Investment Income (Loss), Net
For the years ended December 31, 2024, compared to the same period in 2023, Mezzanine Investment Income (Loss), Net decreased $153.4 million due primarily to a non-cash impairment charge of $158.0 million in the year ended December 31, 2023, partially offset by the recognition in income of the $4.0 million non-refundable option payment upon expiration of the option to acquire the remaining 80% in the Mezzanine Investment.
Realized and Unrealized Gains (Losses) on Interest Rate Contracts
We are required to adjust our interest rate contracts to fair value on a quarterly basis. As a result of the mark-to-market adjustments, we recorded unrealized losses of $4.2 million and $3.8 million during the years ended December 31, 2024, and 2023, respectively. In addition, we realized gains of $6.0 million and $4.9 million during the years ended December 31, 2024, and 2023, respectively.
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Realized and Unrealized Gains (Losses) on Equity Investments
We measure our investments in stock based on its market price at period end and our investments in property technology funds at NAV as a practical expedient. In addition, we measure our investment in IQHQ using the measurement alternative. Under the measurement alternative, the investment is measured at cost less impairment if any needed, with subsequent adjustments for observable price changes of identical or similar investments of the same issuer since it does not have a readily determinable fair value. As a result of changes in the values of these investments, we recorded unrealized losses of $49.5 million during the year ended December 31, 2024, compared to unrealized gains of $0.7 million for the same period in 2023, due primarily to a $48.6 million non-cash impairment recognized on our investment in IQHQ. There were no impairments or observable price changes in 2023.
Gain on Dispositions of Real Estate
During the year ended December 31, 2024, we recognized gains on the disposition of real estate of $10.6 million due primarily due to the sale of The Hamilton compared to gains of $8.0 million recognized for the same period in 2023 that resulted from the sale of one land parcel and the contribution of real estate to an unconsolidated joint venture.
Other Income (Expense), Net
Other income (expense), net , includes costs associated with our risk management activities, partnership administration expenses, fee income, certain non-recurring items, and activity related to our unconsolidated real estate partnerships. For the year ended December 31, 2024, compared to the same period in 2023, Other income (expense), net decreased by $2.1 million, or 27.1%, due primarily to the incremental expense associated with pre-existing long-term incentive partnership units recorded upon the resignation of one of our board members in the prior period.
Income Tax Benefit (Expense)
Certain aspects of our operations, including our development and redevelopment activities, are conducted through taxable REIT subsidiaries, or TRS entities. Additionally, our TRS entities hold our investment in 1001 Brickell Bay Drive.
Our income tax benefit (expense) calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities. Income taxes, as well as changes in valuation allowance and incremental deferred tax items in conjunction with intercompany asset transfers and internal restructurings (if applicable), are included in Income tax benefit (expense) in our C onsolidated Statements of Operations.
Consolidated GAAP income or loss subject to tax consists of pretax income or loss of our taxable entities and income and gains retained by the REIT. For the year ended December 31, 2024, we had consolidated net losses subject to tax of $28.2 million, compared to consolidated net losses subject to tax of $15.2 million for the same period in 2023.
For the year ended December 31, 2024, we recognized income tax benefit of $11.1 million, compared to income tax benefit of $12.8 million for the same period in 2023. The year-over-year decrease is due primarily to changes in 2023 to the effective tax rate expected to apply to the reversal of our existing deferred items, partially offset by increased tax benefit from higher losses in 2024 at our TRS entities.
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Liquidity and Capital Resources
Liquidity
Liquidity is the ability to meet present and future financial obligations. Our primary sources of liquidity are cash flows from operations and borrowing capacity under our loan agreements.
As of December 31, 2024, our available liquidity was $321.0 million, which consisted of:
• $141.1 million in cash and cash equivalents;
• $31.4 million of restricted cash, including amounts related to tenant security deposits and escrows held by lenders for capital additions, property taxes, and insurance; and
• $148.5 million of available capacity to borrow under our revolving secured credit facility.
As of December 31, 2024, we had sufficient capacity on our construction loans to cover our remaining commitments on development and redevelopment projects of approximately $146.9 million. We also have unfunded commitments in the amount of $1.4 million related to our investments in entities that develop technology related to the real estate industry. Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital expenditures, and future investments. Additionally, our third-party property managers may enter into commitments on our behalf to purchase goods and services in connection with the operation of our apartment communities and our office building. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to historical levels.
We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for the next twelve months.
In the event that our cash and cash equivalents, revolving secured credit facility, and cash provided by operating activities are not sufficient to cover our liquidity needs, we have the means to generate additional liquidity, such as from additional property financing activity and proceeds from apartment community sales. We expect to meet our long-term liquidity requirements, including debt maturities, development and redevelopment spending, and future investment activity, primarily through property financing activity, cash generated from operations, and the recycling of our equity. Our revolving secured credit facility matures in December 2025.
Leverage and Capital Resources
The availability and cost of credit and its related effect on the overall economy may affect our liquidity and future financing activities, both through changes in interest rates and access to financing. Any adverse changes in the lending environment could negatively affect our liquidity. We have taken steps to mitigate a portion of our short-term refunding risk. However, if property or development financing options become unavailable, we may consider alternative sources of liquidity, such as reductions in capital spending or apartment community dispositions.
As of December 31, 2024, all of our outstanding non-recourse property debt had a fixed interest rate. In addition, the weighted-average contractual rate on our non-recourse debt was 4.4%, and the average remaining term to maturity was 6.8 years. Our use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates.
Our primary sources of leverage are property-level debt and non-recourse construction loans. We also have a secured $150.0 million credit facility with a syndicate of financial institutions with $148.5 million of available capacity at December 31, 2024. Our revolving secured credit facility requires that we maintain a fixed charge coverage ratio of 1.25x, minimum tangible net worth of $625.0 million, and maximum leverage of 60% as defined in the credit agreement. We are currently in compliance and expect to remain in compliance with these covenants during the next twelve months.
Changes in Cash, Cash Equivalents, and Restricted Cash
The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash due to operating, investing, and financing activities, which are presented in our Consolidated Statements of Cash Flows in Item 8 of this report.
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Operating Activities
For the year ended December 31, 2024, net cash provided by operating activities was $47.0 million. Our operating cash flow is primarily affected by rental rates, occupancy levels, operating expenses related to our portfolio of apartment communities and general and administrative costs. Cash provided by operating activities for the year ended December 31, 2024, decreased by $3.5 million compared to the same period in 2023, due primarily to the timing of balance sheet position changes, increased interest expense primarily driven by the substantial completion of Upton Place, Strathmore Square, and Oak Shore in 2024, offset by increased net operating income driven by higher rents and occupancy.
Investing Activities
For the year ended December 31, 2024, net cash provided by investing activities of $30.6 million consisted primarily of $186.2 million of proceeds from dispositions of real estate and $5.8 million of proceeds from dispositions of unconsolidated real estate partnerships, offset by capital expenditures of $160.0 million. Net cash provided by investing activities for the year ended December 31, 2024, increased by $291.0 million compared to the same period in 2023, due primarily to greater proceeds from dispositions of real estate and unconsolidated real estate partnerships and decreased capital expenditures.
Financing Activities
For the year ended December 31, 2024, net cash used in financing activities of $43.9 million consisted primarily of principal repayments of non-recourse construction loans, the redemption and purchase of noncontrolling interests, and common stock repurchases, offset by proceeds from non-recourse construction loans and proceeds from interest rate contracts. Net cash used in financing activities for the year ended December 31, 2024, changed by $163.3 million compared to the same period ended in 2023, due primarily to current year repayments of non-recourse construction loans, the redemption and purchase of noncontrolling interests, and decreased proceeds from interest rate contracts, partially offset by increased proceeds from non-recourse construction loans and contributions from noncontrolling interests.
Non-GAAP Measures
We use EBITDAre and Adjusted EBITDAre in managing our business and in evaluating our financial condition and operating performance. These key financial indicators are non-GAAP measures and are defined and described below. We provide reconciliations of the non-GAAP financial measures to the most comparable financial measure computed in accordance with GAAP.
Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”)
EBITDAre and Adjusted EBITDAre are non-GAAP measures, which we believe are useful to investors, creditors, and rating agencies as a supplemental measure of our ability to incur and service debt because they are recognized measures of performance by the real estate industry and allow for comparison of our credit strength to different companies. EBITDAre and Adjusted EBITDAre should not be considered alternatives to net income (loss) as determined in accordance with GAAP as indicators of liquidity. There can be no assurance that our method of calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real estate investment trusts. Nareit defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, depreciation, and amortization expense, further adjusted for:
• gains and losses on the dispositions of depreciated property;
• impairment write-downs of depreciated property;
• impairment write-downs of investments in unconsolidated partnerships caused by a decrease in the value of the depreciated property in such partnerships; and
• adjustments to reflect our share of EBITDAre of investments in unconsolidated entities.
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EBITDAre is defined by Nareit and provides for an additional performance measure independent of capital structure for greater comparability between real estate investment trusts. We define Adjusted EBITDAre as EBITDAre adjusted to exclude the effect of the following items:
• net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests;
• realized and unrealized (gains) losses on interest rate contracts, which we believe allow investors to compare a measure of our earnings before the effects of our capital structure and indebtedness with that of other companies in the real estate industry;
• the non-cash (income) loss recognized on our Mezzanine Investment; and
• the non-cash (income) loss recognized on a passive equity investment.
The reconciliation of net income (loss) to EBITDAre and Adjusted EBITDAre for the years ended December 31, 2024 and 2023 is as follows (in thousands):
Year Ended December 31,
2024
2023
Net income (loss)
$
(96,000
)
$
(157,319
)
Adjustments:
Interest expense
70,057
37,718
Income tax (benefit) expense
(11,071
)
(12,752
)
Gain on dispositions of real estate
(10,600
)
(7,984
)
Unrealized (gains) losses from investment in unconsolidated partnerships
2,597
—
Depreciation and amortization
86,359
68,834
Adjustment related to EBITDAre of unconsolidated partnerships
872
806
EBITDAre
$
42,214
$
(70,697
)
Net (income) loss attributable to redeemable noncontrolling
interests in consolidated real estate partnerships
(13,958
)
(13,924
)
Net (income) loss attributable to noncontrolling interests
in consolidated real estate partnerships
1,849
(3,991
)
EBITDAre adjustments attributable to noncontrolling interests
(4,254
)
(272
)
Mezzanine investment (income) loss, net
2,432
155,814
Realized and unrealized (gains) losses on interest rate contracts
(1,752
)
(1,119
)
Unrealized (gains) losses on a passive equity investment
48,615
—
Adjusted EBITDAre
$
75,146
$
65,811
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions. We believe that the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our consolidated financial statements for the year ended December 31, 2024. Refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations , of Aimco's and Aimco Operating Partnership's combined Annual Report on Form 10-K for the years ended December 31, 2023 and 2022 for significant judgments and estimates related to comparative reporting period.
Impairment of investment in IQHQ
On a periodic basis, we perform a qualitative impairment assessment on our investment in IQHQ in accordance with GAAP. We determined during the year ended December 31, 2024 that our investment in IQHQ was impaired after consideration of factors, including adverse capital market conditions, increased real estate development costs, and IQHQ's financial condition. As a result, we recognized a $48.6 million non-cash impairment to reduce the carrying value of the investment in IQHQ to $11.1 million as of December 31, 2024.
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The measurement of the impairment loss is based on the fair value of our investment in IQHQ. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of our investment in IQHQ incorporates various estimates, assumptions, and market data, the most significant being projected operational cash flow, capitalization rates, and discount rates. We determine capitalization rates and discount rates using third-party market research analytics. Property operational cash flows are based on historical, current and expected future operating results and take into consideration stated operational strategies. These projections are adjusted to reflect current economic conditions and require considerable management judgment.
Impairment of Real Estate and Other Long-Lived Assets
Quarterly, or when changes in circumstances warrant, we will assess our real estate properties and other long-lived assets for indicators of impairment. The judgments regarding the existence of impairment indicators are based on certain factors. Such factors include, among other things, operational performance, market conditions, our intent and ability to hold the related asset, as well as any significant cost overruns on development projects.
If a real estate property or other long-lived asset has an indicator of impairment, we assess its recoverability by comparing the carrying amount to our estimate of the undiscounted future cash flows, excluding interest charges, of the asset. If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the asset. There were no such impairments for the years ended December 31, 2024, 2023, and 2022.
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